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SUPREME COURT OF THE STATE OF NEW YORK

COUNTY OF NEW YORK

THE PEOPLE OF THE STATE OF NEW YORK, by

LETITIA JAMES, Attorney General of the State of
New York, Index No. 451130/2018

Petitioner,
REPLY MEMORANDUM OF
-against- LAW IN FURTHER
SUPPORT OF THE
DONALD J. TRUMP, DONALD J. TRUMP JR., VERIFIED PETITION
IVANKA TRUMP, ERIC F. TRUMP, and THE
DONALD J. TRUMP FOUNDATION, Motion Sequence No. 1

Respondents.

LETITIA JAMES

Attorney General
of the State of New York

28 Liberty Street

New York, New York 10005

Attorney for Petitioner

MATTHEW COLANGELO, Chief Counsel

JAMES SHEEHAN, Chief of Charities Bureau

LAURA WOOD, Senior Advisor and Special Counsel

YAEL FUCHS, Co-Chief of the Enforcement Section, Charities Bureau

STEVEN SHIFFMAN, Assistant Attorney General

PEGGY FARBER, Assistant Attorney General

Of Counsel

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TABLE OF CONTENTS

TABLE OF AUTHORITIES .. .. ............. ii

PRELIMINARY STATEMENT 1

ARGUMENT

I. JUDGMENT SHOULD BE GRANTED SINCE RESPONDENTS

HAVE FAILED TO RAISE ANY ISSUES OF FACT

A. The Attorney General's Claims are Established by the

Uncontroverted Evidence Before the Court

B. Resp0ñdêñts Have Failed to Raise Any Issues of Fact 6

C. This Action Is a Straightforward Application of New York Law to the

Respondents'
Facts Presented by Extensive Pattern of Illegal Conduct ...... 8

1. The Respondents Repeatedly Misused Charitable Assets .................. 8

2. The Injunctive Relief Sought Is Appropriate and Consistent With

The Relief The Attorney General Seeks and Obtains in Similar Cases 9

RESPONDENTS'
II. AFFIRMATIVE DEFENSES FAIL TO
RAISE ISSUES TO DEFEAT SUMMARY JUDGMENT 10

CONCLUSION 13

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TABLE OF AUTHORITIES

CASES PAGES(S)

22 Park Place Coop. v. Bd. of Assessors,

102 A.D.2d 893 (2nd Dep't 1984) 7

American Sav. Bank v. Imperato,

159 A.D.2d 444 (1st Dep't 1990) 7

Arcadian Painting and Decorating Corp. v. Helmer Cronin Const.,

229 A.D.2d 896 (3rd Dep't 1996) 8

Cabrera v. Ferranti,
89 A.D.2d 546 (1st Dep't 1982) 7, 8

City of New York v. City Civ. Serv. Comm'n,

60 N.Y.2d 436 (1983) 11

Hanson Trust PLC v. ML SCM Acquisition, Inc.,

781 F.2d 264 (2nd Cir. 1986) 11

Haygood v. Prince Holdings 2012, LLC,

60 Misc.3d 1220(A), 2018 WL 3765205 ... . .................10

In re Fin. Guar. Ins. Co.,

39 Misc.3d 208, 210 (Sup. Ct. N.Y. Cty. 2013) 7

Karr v. Black,
55 A.D.3d 82 (1st Dep't 2008) ................... ........... ...............6

Kreisler Borg Florman Gen. Const. Co. v. Tower 56, LLC,

58 A.D.3d 694 (2nd Dep't 2009) 5

Macnish-Lenox, LLC v. Simpson,

17 Misc.3d 1118(A), 2007 WL 3086028 (Sup Ct Kings Cty. Oct. 23, 2007) 11

Manion v. Pan American World Airways,

55 N.Y.2d 398 (1982) 10

Matter of Hamptons Hosp. & Med Ctr. v. Moore,

52 N.Y.2d 88 (1981) ......................... 11

ii

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Matter of Jamestown Lodge 1681 Loyal Order of Moose (Catherwood),

31 A.D.2d 981 (3rd Dep't 1969) 11

North Shore Univ. Hosp. v. Muller,

19 Misc.3d 143(A), 2008 WL 2285877 (App. Term 2nd Dep't May 27, 2008) ......7

Pell Street Nineteen Corp. v. Mah,

243 A.D.2d 121 (1st Dep't 1998) ....-5

People v. James,

39 Misc.3d 1206(A), 2013 WL 1390877 (Sup. Ct. N.Y. Cty. Apr. 3, 2013) 12

Robbins v. Growney,

229 A.D.2d 356 (1st Dep't 1996) 10-13

Tucciarone v. Automobile Club,

175 A.D.2d 616 (4th Dep't 1991) 8

Zervos v. Trump,
No. 150522/17, slip op. (1st Dep't Mar. 14, 2019) 13

Zuckerman v. City of New York,

49 N.Y.2d 557 (1980) 7

STATE STATUTES

CPLR

§ 408 2

§ 3018 10

EPTL

§ 8-1.4 3, 11-12

§ 8-1.8 3

§ 8-1.9

N-PCL

§ 112 11-12

§ 715
§ 717
§ 720 3

MISCELLANEOUS AUTHORITIES

Robert C. Degaudenzi, Tax-Exempt Public Charities: Increasing Accountability

and Compliance, 36 Cath. Law. 203 (Fall 1995) 6

iii

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PRELIMINARY STATEMENT

Petitioner, the Attorney General, brought this special proceeding against the Donald J.

Trump Foundation and its directors (collectively, the "Respondents"1), after an investigation

revealed a pattern of illegality involving the Foundation and its assets. As detailed in the Petition

and supporting affirmation, Respondents broke some of the most basic laws that apply to private

foundations. They failed to meet as a board, oversee grant-making, or implement policies to

protect the charity's assets from misuse. In this vacuum of oversight and diligence, Mr. Trump

caused the Foundation to enter repeatedly into self-dealing transactions and to coordinate

unlawfully with his presideñtial Campaign. This proceeding seeks to hold the Respoñdeñts

responsible for violating the public trust and the clear standards required of them by law.

Respondents moved to dismiss the Petition and the Court, by decision and order dated

Respondents' answer.2
November 21, 2018, denied motion and directed Respondents to

(Decision and Order ("Op.") at 26.) Following the Court's decision, the parties stipdated that

the Foundation would dissolve under court supervision, the Fourth and Fifth Causes of
resolving

Action. The claims remaiñiñg are those for waste, bars on service as fiduciaries of not-for-profit

organizations, damages and restitution, including a claim agaiñst Mr. Trump for the payrñêñt of

up to double the benefit obtained by Mr. Trump and his Campaign in connection with the Iowa

Fundraiser in January 2016.

The substantial evidentiary record submitted by the Attorney General estãblishes that

these claims should be granted. Together with the Petition, the Attorney General subñiitted a

1
Petitioner continues to employ the defined terms set forth in the Memorandum of Law in Support of the
Respondents'
Verified Petition ("MGviñg Memo") and the Memorandum of Law in Opposition to Motion
to Dismiss ("MTD Opposition Memo").
2
The Court dismissed the Sixth Cause of Action, which asserted a claim to preliminarily enjoin the
Individual Respondents from operating the Foundation, as moot beeâüse Respondents agreed to not
operate the Foundation during the pendency of the proceeding. (Op. at 26.)

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detailed affirmation introduciñg testimonial and docunieñtary evidence that presented a prima

Respondents'
facie case for the Petition's claims. This evidence consists largely of own emails,

admissinna under oath, documents Respondents filed with governmental agcñcies and signed

under peñalty of perjury, and photographs and videos of Mr. Trump taking the very actions, such

as distributing Foundation assets at political rallies, which form the basis for the Petition's

claims.

This evidence is unchallenged and unrebutted; Respondents have not submitted any

admissible evidence to counter the substantial evidentiary record submitted by the Attorney

General.3
During the pendency of this proceeding and as provided for in CPLR § 408, Petitioner

served two Notices to Admit. In their responses, Respondents admitted facts sufficient to

establish the admissibility of virtually all the evidence not already in admissible form submitted

in support of the Petition Then, on February 8, 2019, Respondents submitted an unverified

answer dcñyiñg in conclusory fashion virtually all the allegations in the Petition and asserting ten

affirmative defenses. The Individual Respondents did not submit affidavits, nor did anyone at

Trump.4
the Trump Campaign or any other entity controlled by Mr. As a result, and for the

reasons more set forth below, Respondents have failed to raise genuine issues of fact
fully any

with respect to the claims in the First, Second and Third Causes of Action in the Petition. As

such, judgment should be entered based on the current record.

3
For the Court's convenience, Fetitioner has prepared a statement C----rizing the cvidentiary basis for
the facts on which the Attorney General's claims are based (the "Evideñce Summary"). The Evidence

S---=:-y is sttached as Exhibit 1 to the March 14, 2019 Reply Affirmation of Steven shiffman ("Reply
Aff.").
4 Respondents submitted affirmations Futerfas and Sheri the current and
from Alan Dillon, respectively,
former cóunsel for Respondents, in support of the motion to Æcmiss These attorney affirmations were not
based on personal knó wiedge (except with respect to procedural issues irrciciant to the claims in the

Petition) and did not introduce any admissible documentary or testimanial evidence.

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ARGUMENT

L JUDGMENT SHOULD BE GRANTED SINCE RESPONDENTS

HAVE FAILED TO RAISE ANY ISSUES OF FACT.

The submission of papers in this special proceeding is now complete, and the

Respondents have failed to raise any triable issues of fact. The evidentiary record before the

Court demonstrates that the relief sought in the first three causes of action - the unresolved
only

claims - should be granted because: the Individual Respondents breached their

(i) fiduciary

duties, wasted charitable assets, and permitted the Foundation to be used for improper political

purposes, and (ii) Mr. Trump willfully and intentionally caused the Foundation to enter into an

impermissible related-party transaction by giving his Campaign control over $2.8 million

donated to the Foundation. Mr. Trump's use of the Foundation's assets to benefit his Campaigñ

demn-trated his complete disregard for two of the most basic principles goverñing charities, of

which he was well aware: (i) that charities cannot intervene in political elections; and (ii) that

charitable assets cannot be used for the benefit of those who control them. The proper remedies

for these violations include bars on fiduciary service, restitution and damages.

A. The Attorney General's Claims are Established by the Uncontroverted

Evidence Before the Court.

The three unresolved causes of action are for breach of fiduciary duty and waste under

N-PCL §§ 717 and 720, for parallel claims under EPTL §§ 8-1.4 and 8-1.8, and for wroñgful

related-party transactions under N-PCL § 715(f) and EPTL § 8-1.9(c). This Court held that the

Petition's allegations stated claims for these causes of action as a matter of law. (Op. at 10-22.)

Respondents'
The substantial evidence submitted with the Petition, supplemented by admissions,

establishes that each of these claims should now be granted.

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The undisputed evidence establishes that the Foundation's board breached its fiduciary

duties. .(See Mov. Memo at 11-13.) The evidence shows that the board existed in name only and

that the Individual Respondents failed to exercise any oversight over the Foundation, breaching

their duty of care. The Individual Respondents held no board meetings, kept no minutes, held no

votes, failed to adopt required policies and procedures, failed to oversee the Foundation's grants,

failed to ensure that the Foundation complied with applicable law, and failed to take any steps to

ensure that its assets were not used to impermissibly further Mr. Trump's interests. (Evidence

Summary ¶¶ 5-12.) These failures were not mere techñicalities; they permitted Mr. Trump to use

the Foundation's assets for his own benefit and the benefit of entities in which he had a financial

interest. In particular, because of the lack of oversight, Mr. Trump used Foundation funds to,

among other things, pay for portraits of himself; make political donations, pay for advertising for

Trump hotels, settle lawsuits involving the Trump Organization, and to improperly intervene in

the 2016 election. (Mov. Memo at 3-8, MTD Opp. Memo at 14-21; Shiffman Aff. 15-
11-20; ¶¶

72.)

The evidence also shows that, in 2016, Mr. Trump caused the Foundation to take part in a

wrongful related-party transaction when the Trump Campaign coopted the Foundation and

directed when and to whom it should make grants to advance Mr. Trump's presidential bid.

(Shiffman Aff. ¶¶ 21-43; MTD Opp. Memo at 14-16.) The Court recognized that the Petition

adequately alleged these claims. (Op. at 16-22.) The Petition's allegations are supported by

uncontroverted evidence that: (i) Mr. Lewandowski and others at the Campaign dictated the

timing and amounts of the Foundation's grants from the proceeds of the Iowa Fundraiser, with

the Fmmdation's board playing no role whatsoever (Evidence Summary ¶¶ 19-27); (ii) $500,000

of these grants were distributed and publicized by the Campaign and Mr. Trump personally with

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great fanfare at rallies in Iowa on the eve of the important Iowa caucuses (id ¶¶ 28-31), and at

press conferences where Mr. Trump took personal credit for the grants that the Foundation made

(id ¶ 32); and (iii) Mr. Trump had a financial interest in the Campaign not only because he

sought and received substantial publicity from such grants without reaching into his own pockets,

but also by virtue of his own large investments in the Campaign, including nearly $50 million in

loans. (Id. ¶ 34; Mov. Mem. at 17-20; MTD Opp. Memo at 11, 15-16.)

The unrefuted evidence also estâblishes that in using the Foüñdation's charitable assets,

intentional."
Mr. Trump's conduct was "willful and (Evidence Summary ¶ 35; Mov. Memo at

18-20; MTD Opp. Memo at 16-19.) The evidence shows that Mr. Trump was aware that

directors of charities may not use charitable assets for a director's benefit and that a Foundation

is absolutely prohibited from using its assets to intervene in public elections, but that he

nevertheless used money donated to the Foundation to benefit his Campaigñ. (Evidence

Mr. does not offer evidence - such as an affidavit

Summary ¶ 35.) Trump any explaining why

his violations of the law were accidental - to create an issue of fact on the willfulness
purportedly

of his conduct. As such, a summary determination that his conduct was willful and intentional

may be made. See, e.g., Kreisler Borg Florman Gen. Const. Co. v. Tower 56, LLC, 58 A.D.3d

694, 696 (2nd Dep't 2009) (summary judgment appropriate where circumstances warranted

defendants' conclusory"
conclusion that there was actual intent to defraud and "cryptic and

explanãtion of transaction was insufficient to create issue of fact); see Pell Street Nineteen Corp.

v. Mah, 243 A.D.2d 121, 125 (1st Dep't 1998).

The appropriate remedy for this willful and intentional conduct is damages of "an amount

obtained."
up to double the amount of any benefit improperly N-PCL § 715(f)(4). Here, Mr.

Trump and the Campaign benefited from the highly valuable media coverage of the Iowa

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Fundraiser and of the political rallies at which grants were disbursed, and from the $2.8 million

that they did not have to pay in order to garner that coverage. (Op. at 21; MTD Opp. Memo at

15-16.)

The statute provides for a penalty based on the beñejil obtaiñcd by the related party to

deter such wrongdoing, and to address the fact that the misuse of charitable funds for the benefit

of insiders is prevalent, seriously compromises the ability of an organization to carry out its

charitable mission and undermines public confidence in the sector. (See MTD Opp. Memo at 14,

amendments N-PCL.)5
n.8, expl ining the intent behind the to the This case showcases the type

of conduct the statute was in6nded to address. Here, Mr. Trump, the candidate, exhorted the

public to donate to his Foundation and then gave his Campaign full control over the

disbursement of the donations, from choosing the identity of the recipicnts to the amounts and

timing of the grants. This arrangement not only violated New York law, but also ran afoul of

federal campaign finance law, turning a charity fundraiser into a campaign fundraiser and

campaign rallies into opportunities for the candidate to dole out money the public had donated to

a charity. As a result of his willful and intentional conduct, the Court should require Mr. Trump

to pay restitution of $2.8 million, plus a penalty in an amount to $5.6 million

up

B. Respondents Have Failed to Raise Any Issues of Fact

Respondents'
Answer fails to raise any issues of fact warranting a hearing or trial.

Special proceedings are governed by the same evidentiary standard of proof as a motion for

judgment. Karr v. Black, 55 A.D.3d 82, 86 (1st Dep't 2008). After the petitioner
summary

5 The for added in 2013 to N-PCL is similar to the penalties imposed

penalty self-dcaling, § 715, by
Sections 4941 and 4958 of the IRS Code, which were added to punish the parties that engaged in self-

dealing, rather than the charities or their htended beneficiaries. Robert C. Degaudenzi, Tax-Exempt
Public Charities: Increasing Accountability and Compliance, 36 Cath. Law. 203, 208-09 (Fall 1995)
(citing Congressional hearings).

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provides admissible evidence to establish the cause of action, the burden then shifts to

respondents to "demonstrate by admissible evidence the existence of a factual issue requiring a

so."
trial of the action or tender an acceptable excuse for his failure to do Zuckerman v. City of

New York, 49 N.Y.2d 557, 560 (1980). An evidentiary hearing is uññëcessary where the party

opposing the motion does not submit evidence sufficient to raise a material issue of fact. See 22

Park Place Coop. v. Bd of Assessors, 102 A.D.2d 893, 893-94 (2nd Dep't 1984). Here, no

hearing is necessary beeâüse Respondents have not introduced any evidence to create an issue of

fact, submitting only an unverified answer with general denials and conclusory defenses.

The law is clear that in an Article 4 proceeding, "bare allegations or conclusory assertions

are insufficient to create genuine, bona fide issues of fact necessary to defeat such a motion [for a

determination]."
summary In re Fin. Guar. Ins. Co., 39 Misc.3d 208, 210 (Sup. Ct. N.Y. Cty.

2013) (citing Rotuba Extruders, Inc. v. Ceppos, 46 N.Y.2d 223, 231 (1978)); see American Sav.

(1st
Bank v. Imperato, 159 A.D.2d 444, 444 Dep't 1990) ("shadowy semblance of an issue is

insufficient to defeat summary judgment"). As the First Department has explained:

[i]t is iñcumbent upon a defendant who opposes a motion for summary judgment

to assemble, lay bare and reveal his proofs, in order to show that the matters

set up in his answer are real and are capable of being established upon a

trial.

(1st
Cabrera v. Ferranti, 89 A.D.2d 546, 547 Dep't 1982) (attorney's affidavit unsupported by

evidence cannot defeat summary judgmëñt) (cmphasis added). An unverified answer, such as the

one submitted here, has no evidentiary value and is insufficient to meet this standard. See North

Shore Univ. Hosp. v. Muller, 19 Misc.3d 143(A), 2008 WL 2285877, *1 (App. Term 2nd Dep't

May 27, 2008) (unverified answer "cannot be utilized in lieu of a sworn affidavit to raise a triable

defeat"
issue of fact to summary judgmeñt). Moreover, even if it had been verified, the answer

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would be insufficient to raise a genuine issue because it consists solely of general denials and

conclusory allegations. See, e.g., Arcadian Painting and Decorating Corp. v. Helmer Cronin

(3rd conclusory"
Const., 229 A.D.2d 896, 897 Dep't 1996) ("broad and denials in a verified

(45
answer "have no evidentiary value"); Tucciarone v. Automobile Club, 175 A.D.2d 616, 617

denial"
Dep't 1991) ("general without evidentiary facts insufficient to defeat summary

judgment).

Thus, judgment is appropriate because Respondents have failed to submit any admissible

fact6
evidence to raise an issue of with respect to the prima facie case established by the Attorney

General's evidence.

C. This Action Is a Straightforward Application of New York Law to the Facts

Respondents'
Presented by Extensive Pattern of Illegal Conduct

1. The Respondents Repeatedly Misused Charitable Assets

The evidence shows that the Foundation's charitable assets were repeatedly used for the

personal benefit of Mr. Trump and entities in which he had a fiñañcial interest. This misuse of

charitable assets is precisely what New York not-for-profit law is intended to address, and the

remedies sought are completely consistent with the Attorney General's authority and practice in

Respondents' "uñprecedeñted"
this area. argument that this action is because the organization

allegedly donated all its money to charities (Ans. ¶¶ 1, 4), is based on a fundamental

mischaracterization of the wrongdoing. When the Feündation made disburscmcñts to satisfy the

debts of Mr. Trump and entities he controlled, such as when Mr. Trump caused the Foundation to

make a $100,000 disbursemcñt to satisfy a legal obligation of his Mar-a-Lago club, the

6 subsined of their Motion to Dismiss were not made on

The attorney affirmations Respondents in support
personal knowledge and did not otherwise introduce admissible evidence. As such, they are of "no
disregarded"
probative value and should be on this motion. See Cabrera, 89 A.D.2d at 547.

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disbursements were self-dealing transactions that benefited Mr. Trump and entities in which he

had a financial interest. (See Op. at 13.) Similarly, when the Foundation ceded control over its

assets to the Trump Campaign and let the Campaign distribute funds to further Mr. Trump's

political interests, the Campaign received an in-kind contribution that is a gift under New York

law. (Moving Memo at 16-17; MTD Opp. Memo at 15-16;see Op. at 20-21.)

As this Court noted, that the money "ultimately went to charitable organizations does not,

claim"
by itself, refute a that the funds were used improperly to benefit Mr. Trump. (Op. at 21.)

In reality, there were two distinct transactions in each instance: (i) a distribution by.the

Foundation of money, or control over that money, to a non-charitable entity Mr. Trump

controlled (such as Mar-a-Lago or the and a subsequent distribution that non-

Campaign); (ii) by

charitable entity to a charity. That the second distribution went to a charity does not cleanse the

first distribution, which was non-charitable and constituted waste as well as an impermissible

related-party transaction. (See MTD Opp. Memo at 20-21, 28-29.)

2. The Injunctive Relief Sought Is Appropriate and Consistent With The

Relief The Attorney General Seeks and Obtains in Similar Cases

The Petition seeks a 10-year bar on Mr. Trump from serving as the fiduciary of any

charitable corporation operating in New York and a 1-year bar on the remaiñing Individual

Respondents, the latter subject to being lifted upon adeqüãte training. (Verified Petition ("Pet.")

Respondents'
at 39.) This relief is, contrary to the cenclüsory assertion, in line with the relief the

Attorney General routinely seeks and obtains in similar cases.

As detailed in the MTD Opposition Memo, the injunctive relief of fiducimf bars sought

here is consistent with the relief obtained in many recent settlements and cases. (See MTD Opp.

Mem. at 25-29). In addition to the matters cited in the MTD Opposition Memo, the Attorney

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General respectfully draws the Court's attention to the permancat bars imposed by other recent

settlements. In the settlement of the Investigation of the Breast Cancer Research Foundation,

Inc., the charity's founder and board member, who, unlike Mr. Trump did not obtain any

financial benefit from the charity, was permanently banned from fiduciary service because his

abdication of fiduciery duty permitted a third party to coopt the charity. (Reply Aff. Ex. 5 at 19.)

In People v. National Children's Leukemia Foundation, the court approved a settlement under

which the founder of a charity and his son both received permanent bans on fiduciary service.

(Id. Ex. 6 ¶ 2.) The founder personally benefitted from the wrongdoing, while his son did not

benefit financially but rubber stamped his father's decisions, to the detriment of the charity. (Id.

Ex. 6 at Annex A ¶ 4.)

RESPONDENTS'
II. AFFIRMATIVE DEFENSES FAIL TO
RAISE ISSUES TO DEFEAT SUMMARY JUDGMENT.

In their answer, Respondents assert ten affirmative defenses, not one of which presents a

legitimate basis for denying the relief sought in the Petition. It is well settled that the respondent

bears the burden of pleading and proving affirmative defenses. CPLR § 3018(b); Manion v. Pan

American World Airways, 55 N.Y.2d 398, 405 (1982). Affirmative defenses that merely plead

cõnclusions of law without supporting facts are insufficient as a matter of law and are fatally

deficient. Robbins v. Growney, 229 A.D.2d 356, 358 (1st Dep't 1996); Haygood v. Prince

Holdings 2012, LLC, 60 Misc.3d 1220(A), 2018 WL 3765205 (Table) at *8 (Sup. Ct. N.Y. Cty.

July 30, 2018) ("one sentence legal conclusions ... are insufficient to make out an affirmative

defense"
and should be dismissed).

10

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The First Affirmative Defense is that the Petition fails to state a cause of action. This

single señteñce conclüsery defense must be rejected since the Court has already determined that

the Attorney General has stated claims on which relief can be granted. (Op. at 15-16, 22.)

The Second Affirmative Defense of laches, waiver and estoppel should be rejected

because Respondents do not set forth facts - nor could - to support these defenses. See
any they

Robbins, 229 A.D.2d at 358, Haygood, 2018 WL 3765205 at *8. Moreover, these equitable

defenses are not available against the government where, as here, the governmental entity is

acting to enforce public rights. See City of New York v. City Civ. Serv. Comm'n, 60 N.Y.2d 436,

449 (1983); Matter of Hamptoñs Hosp. & Med. Ctr. v. Moore, 52 N.Y.2d 88, 93 (1981); Matter

of Jamestown Lodge 1681 Loyal Order of Moose (Catherwood), 31 A.D.2d 981, 982 (3rd Dep't

1969).

The third affirmative defense, that the Petition is barred by the business judgment rule,

should be rejected because Respondents do not, and could not, provide any factual support for it.

See, e.g., Robbins, 229 A.D.2d at 358. In addition, the business judgmcñt rule is inapplicable

here because it requires that the board exercise its judgment prudently and without conflicts,

where here the Foundation board did not act, let alone act prudently or independently. See, e.g.,

Hanson Trust PLC v. ML SCM Acquisition, Inc., 781 F.2d 264, 274 (2nd Cir. 1986) (business

judgmcñt rule is inapplicable to decisions made in breach of fiduciary duties); Macnish-Lenox,

LLC v. Simpson, 17 Misc.3d 1118(A), 2007 WL 3086028, *10-*12 (Sup Ct Kings Cty. Oct. 23,

2007) (business judgment rule only applies to the decisiens of independent directors).

The Fourth Affirmative Defeñse, that the Attorney General lacks standing to bring this

action, is frivolous. In addition to being unsupported by any factual support or other explanation,

it is inconsistent with black letter law giving the Attorney General standing to bring these claims.

11

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N-PCL § 112 and EPTL § 8-1.4(m) expressly authorize the Attorney General to bring

proceediñgs to enforce the laws applicable to charitable organizations. See, e.g., People v.

James, 39 Misc.3d 1206(A), 2013 WL 1390877, *5 (Sup. Ct. N.Y. Cty. Apr. 3, 2013).

The Fifth Affirmative Defense, statute of limitations, was addressed in the decision on the

Motion to Dismiss, in which this Court held that the statute of limitations was tolled by

Respõñdents' within"
continuing conduct and that, in any event, "many of the allegations are the

applicable statute. (Op. at 6-9.) Respondents have not submitted any evideñee to create an issue

of fact to support this defense and, accordingly, it should be rejected for the same reasons set

forth in the Court's prior decision.

The Sixth Affirmative Defense, that the Petition is barred by documentary evidence,

should be dismissed because Respondents have not introduced any admissible evidence or

offered an explanation of how the documentary evidence submitted by the Attorney Geñeral

Respondents'
supports defenses. See, e.g., Robbins, 229 A.D.2d at 358.

The Seventh Affirmative Defense of bias has no merit and was rejected by the Court in

the decision on the Motion to Dismiss. (Op. at 9-10.) In its decision, the Court rejected this

defense because it found that "given the very serious allegations set forth in the petition, ... there

is no basis for findiñg that añimus and bias were the sole motivating factors for initiating the

proceeding."
investigation and pursuing this (Id.7)

The Eighth Affirmative Defense, that the Petition is barred because reimbursement has

been made, should be dismissed becãüse it is a bare legal assertion, is factually incorrect, and

ignores the claims for equitable relief. See, e.g., Robbins, 229 A.D.2d at 358. The Attorney

7 Respondents' additional allegations of bias against General James are not

Attorney only meritless, they
Respendents'
cannot logically support claim that the Petition was "filed for improper, biased and political

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General is seeking eqdteble relief, such as fiducim·y bans, based on the improper trañsactions for

which reimbursement was made after the Attorney General commenced its investigation and is

seeking reimbursement for the millions of dollars, particularly relating to the disbursements from

the Iowa Fundraiser, that have not been reimbursed. (See MTD Opp. Memo at 23-24 & n.15.) In

addition, reimbursement has not been sufficient in all cases. For example, Mr. Trump

reimbursed the Foundation approximately $215 for the $10,000 portrait of himself that he bid on

personally, but paid for with the Foundation's assets. (Pet. ¶¶ 87-88.) The justification for the

minimal reimbursement is that it represents the rental value of the portrait. But, the Foundation

should not have paid for the portrait and should be reimbursed for the full $10,000 it spent, plus

interest.

The Ninth Affirmative Defense does not specify any legal grounds on which it is based

and is merely a placeholder and, as such, does not provide any basis for not granting the

Petition's relief.

Finally, the Tenth Affirmative Defense, that the Court lacks jurisdiction over Mr. Trump,

has already been rejected by this Court in its decision on the Motion to Dismiss (Op. at 3-6),

based on reasoning that was recently upheld by the Appellate Division. See Zervos v. Trump,

No. 150522/17, slip op. (1st Dep't Mar. 14, 2019) (attached to the Reply Aff. as Exhibit 7).

CONCLUSION

For the reasons set forth above, Petitioner respectfully requests that the Court grant

judgment to Petitioner for the relief requested.

reasons"
(Ans. at 20), beesese the Petition was filed many months before she was elected or took office.
(See MTD Opp. Memo at 33-35.)

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Dated: New York, New York

March 14, 2019

LETITIA JAMES

Attorney General of the State of New York

Attorney for Petitioners

Yael uchs
Co- hief of the Enforcement Charities Bureau
Section,

28 Liberty Street

New York, New York 10005

Tel. (212) 416-8401

MATTHEW COLANGELO, Chief Counsel

JAMES SHEEHAN, Charities Bureau Chief

LAURA WOOD, Senior Advisor and Special Counsel

STEVEN SHIFFMAN, Assistant Attorney General

PEGGY FARBER, Assistant Attorney General

Of Counsel

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CERTIFICATION

YAEL FUCHS, an attorney duly admitted to practice before the Courts of this State,

hereby certifies the

following under the penalty of perjury pursuant to CPLR § 2106:

The foregoing Reply Memorandum of Law in Further Support of the Verified Petition

complies with Rule 17 of the Rules of the Commercial Division of the Supreme Court of New

York County. According to Microsoft Word, the word-processing software used to prepare the

memorandum of law, the word count of the document, exclusive of the caption, table of contents,

table of authorities and signature block, is 4151 words.

Dated: New York, New York

March 14, 2019

YAEL UCHS

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